Akamai Reports Third Quarter 2012 Financial Results

24 Oct, 2012, 16:01 ET from Akamai Technologies, Inc.

CAMBRIDGE, Mass., Oct. 24, 2012 /PRNewswire/ -- 

  • Third quarter revenue of $345 million, up 23 percent year over year
  • GAAP net income of $48 million, up 14 percent year over year; or $0.27 per diluted share, up 17 percent year over year
  • Normalized net income* of $79 million, up 24 percent year over year; or $0.43 per diluted share, up 26 percent year over year

Akamai Technologies, Inc. (NASDAQ: AKAM), the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere, today reported financial results for the third quarter ended September 30, 2012.  Revenue for the third quarter of 2012 was $345 million, a 23 percent increase over third quarter 2011 revenue of $282 million, and a 4 percent increase over second quarter 2012 revenue of $331 million.

(Logo: http://photos.prnewswire.com/prnh/20100225/AKAMAILOGO )

Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the third quarter of 2012 was $48 million, or $0.27 per diluted share, a 14 percent increase from third quarter 2011 GAAP net income of $42 million, or $0.23 per diluted share, and a 9 percent increase from second quarter 2012 GAAP net income of $44 million, or $0.24 per diluted share.

The Company generated normalized net income* of $79 million, or $0.43 per diluted share, in the third quarter of 2012, a 24 percent increase over third quarter 2011 normalized net income of $63 million, or $0.34 per diluted share, and a 1 percent increase from the prior quarter normalized net income of $78 million, or $0.43 per diluted share. (*See Use of Non-GAAP Financial Measures below for definitions.)

"Akamai experienced its fourth consecutive quarter of accelerating revenue growth and delivered higher margins," said Paul Sagan, President and CEO of Akamai.  "We continued to capitalize on our investments in cloud computing, web security, mobile services, and online video by expanding our product portfolio, while effectively managing the cost and efficiency of our network. These efforts paid off in both the Company's top and bottom line performance."

Adjusted EBITDA* for the third quarter of 2012 was $157 million, up 28 percent from $122 million in the third quarter of 2011, and up 9 percent from $143 million in the prior quarter.  Adjusted EBITDA margin* for the third quarter was 45 percent, up two points from the prior quarter and from the same period last year.  (*See Use of Non-GAAP Financial Measures below for definitions.)

Cash from operations was $141 million in the third quarter of 2012, or 41 percent of revenue.  At the end of the third quarter of 2012, the Company had over $1 billion in cash, cash equivalents and marketable securities.

Sales through resellers and sales outside the United States accounted for 22 percent and 29 percent, respectively, of revenue for the third quarter of 2012.

Share Repurchase Program During the third quarter of 2012, under a share repurchase program that was approved by the Board of Directors in May 2012, the Company repurchased approximately 1 million shares of its common stock for $37 million, at an average price of $31.53 per share.  During the three quarters ended September 30, 2012, the Company repurchased approximately 4 million shares of its common stock for $112 million, at an average price of $31.31 per share. The Company has $68 million remaining on its current authorization, which runs through April 30, 2013.

The Company had approximately 177 million shares of common stock outstanding as of September 30, 2012. 

Quarterly Conference Call Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-800-706-7745 (or 1-617-614-3472 for international calls) and using passcode No. 82472044.  A live Webcast of the call may be accessed at www.akamai.com in the Investor section.  In addition, a replay of the call will be available for one week following the conference through the Akamai Website or by calling 1-888-286-8010 (or 1-617-801-6888 for international calls) and using passcode No. 96448745.

About Akamai Akamai® is the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere.  At the core of the Company's solutions is the Akamai Intelligent Platform™ providing extensive reach, coupled with unmatched reliability, security, visibility and expertise.  Akamai removes the complexities of connecting the increasingly mobile world, supporting 24/7 consumer demand, and enabling enterprises to securely leverage the cloud.  To learn more about how Akamai is accelerating the pace of innovation in a hyperconnected world, please visit www.akamai.com or blogs.akamai.com, and follow @Akamai on Twitter.

 

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)

Sep. 30, 2012

Dec. 31, 2011

Assets

Cash and cash equivalents

$ 182,650

$ 559,197

Marketable securities

282,579

290,029

Accounts receivable, net

236,232

210,936

Deferred income tax assets, current portion

6,444

6,444

Prepaid expenses and other current assets

45,784

55,414

Current assets

753,689

1,122,020

Marketable securities

593,105

380,729

Property and equipment, net

331,218

293,043

Goodwill and other intangible assets, net

803,976

498,300

Other assets

15,365

7,924

Deferred income tax assets, net

42,101

43,485

Total assets

$ 2,539,454

$ 2,345,501

Liabilities and stockholders' equity

Accounts payable and accrued expenses

$ 184,365

$ 123,618

Other current liabilities

28,555

24,774

Current liabilities

212,920

148,392

Other liabilities

66,596

40,859

Total liabilities

279,516

189,251

Stockholders' equity

2,259,938

2,156,250

Total liabilities and stockholders' equity

$ 2,539,454

$ 2,345,501

 

Condensed Consolidated Statements of Operations

(amounts in thousands, except per share data)

(unaudited)

Three Months Ended

Nine Months Ended

Sep. 30,

Jun. 30,

Sep. 30,

Sep. 30,

Sep. 30,

2012

2012

2011

2012

2011

Revenues

$                345,321

$                    331,306

$                    281,856

$            996,075

$           834,798

Costs and operating expenses: 

Cost of revenues * +

109,995

107,457

93,284

320,018

271,999

Research and development *

19,351

17,542

13,542

54,373

37,142

Sales and marketing *

75,924

75,882

54,520

219,096

160,722

General and administrative * +

54,511

57,997

50,834

168,214

140,710

Amortization of other intangible assets

5,381

5,463

4,185

15,611

12,754

Restructuring (benefit) charge

-

(46)

158

14

158

Total costs and operating expenses

265,162

264,295

216,523

777,326

623,485

Operating income

80,159

67,011

65,333

218,749

211,313

Interest income, net

1,593

1,626

3,002

4,865

9,058

Other (expense) income , net

(241)

1,131

(188)

449

(1,330)

Income before provision for income taxes

81,511

69,768

68,147

224,063

219,041

Provision for income taxes

33,280

25,529

25,862

88,366

78,218

Net income

$                  48,231

$                      44,239

$                      42,285

$            135,697

$           140,823

Net income per share:

    Basic

$                      0.27

$                          0.25

$                          0.23

$                  0.76

$                 0.76

    Diluted

$                      0.27

$                          0.24

$                          0.23

$                  0.75

$                 0.74

Shares used in per share calculations:

    Basic

177,455

178,547

183,085

178,040

185,515

    Diluted

181,053

181,817

185,704

181,738

189,089

* Includes stock-based compensation (see supplemental table for figures)

+ Includes depreciation and amortization (see supplemental table for figures)

 

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)

Three Months Ended

Nine Months Ended

Sep. 30,

Jun. 30,

Sep. 30,

Sep. 30,

Sep. 30,

2012

2012

2011

2012

2011

 Cash flows from operating activities:

 Net income

$              48,231

$             44,239

$             42,285

$           135,697

$          140,823

 Adjustments to reconcile net income to net cash  provided by operating activities:

 Depreciation and amortization 

53,457

50,112

41,761

149,203

124,228

 Stock-based compensation

22,635

25,621

15,141

69,180

42,465

 Provision for deferred income taxes, net

826

-

20,906

826

20,906

 Excess tax benefits from stock-based  compensation

(2,540)

(1,635)

(610)

(17,589)

(11,460)

 Loss (gain) on investments and disposal  of property and equipment, net

142

(107)

(176)

(62)

(172)

 Provision for doubtful accounts

(345)

(86)

782

(61)

1,236

 Changes in operating assets and liabilities:

 Accounts receivable

(27,974)

7,803

(8,277)

(21,587)

(7,821)

 Prepaid expenses and other  current assets

2,131

4,663

(919)

11,103

(78)

 Accounts payable, accrued  expenses and other current  liabilities

44,591

15,939

445

54,732

(5,268)

 Accrued restructuring

(28)

(725)

(148)

(2,897)

(180)

 Deferred revenue

1,401

2,667

796

5,542

(1,386)

 Other noncurrent assets and  liabilities 

(1,031)

1,061

4,303

(536)

13,355

 Net cash provided by operating activities

141,496

149,552

116,289

383,551

316,648

 Cash flows from investing activities:

 Cash paid for acquired businesses,  net of cash received

(14,392)

-

-

(306,030)

(550)

 Purchases of property and equipment  and capitalization of internal-use software  costs

(60,294)

(55,539)

(47,317)

(159,177)

(136,292)

 Proceeds from sales and maturities of  short- and long-term marketable securities

98,567

134,171

388,983

350,152

900,120

 Purchases of short- and long-term  marketable securities

(137,809)

(135,845)

(149,318)

(554,303)

(727,453)

 Proceeds from the sale of property and  equipment

-

2

47

12

135

 Decrease in restricted investments held for  security deposits

-

-

-

-

221

 Net cash (used in) provided by investing  activities

(113,928)

(57,211)

192,395

(669,346)

36,181

 Cash flows from financing activities:

 Proceeds from the issuance of common  stock under stock option and employee  stock purchase plans

6,066

15,491

1,183

28,635

13,305

 Excess tax benefits from stock-based  compensation

2,540

1,635

610

17,589

11,460

 Taxes paid related to net share settlement  of equity awards

(2,370)

(2,541)

(2,173)

(26,566)

(5,680)

 Repurchase of common stock

(36,523)

(67,213)

(155,125)

(111,649)

(247,738)

 Net cash used in financing activities

(30,287)

(52,628)

(155,505)

(91,991)

(228,653)

 Effects of exchange rate changes on cash and  cash equivalents

2,373

(1,441)

(3,209)

1,239

(443)

 Net (decrease) increase in cash and cash equivalents

(346)

38,272

149,970

(376,547)

123,733

 Cash and cash equivalents, beginning of period

182,996

144,724

205,629

559,197

231,866

 Cash and cash equivalents, end of period

$            182,650

$           182,996

$           355,599

$           182,650

$          355,599

 

Three Months Ended

Nine Months Ended

Sep. 30,

Jun. 30,

Sep. 30,

Sep. 30,

Sep. 30,

2012

2012

2011

2012

2011

Supplemental financial data (in thousands):

Stock-based compensation:

Cost of revenues

$                     684

$                   884

$                  634

$               2,251

$               1,779

Research and development

4,427

4,901

2,629

13,258

7,515

Sales and marketing

10,896

10,994

6,951

32,024

19,112

General and administrative

6,628

8,842

4,927

21,647

14,059

     Total stock-based compensation

$                22,635

$              25,621

$             15,141

$             69,180

$             42,465

Depreciation and amortization:

Network-related depreciation

$                41,022

$              37,989

$             31,662

$           113,616

$             93,594

Capitalized stock-based compensation amortization

2,025

1,939

1,592

5,719

5,595

Other depreciation and amortization

5,029

4,721

4,322

14,257

12,285

Amortization of other intangible assets

5,381

5,463

4,185

15,611

12,754

Total depreciation and amortization

$                53,457

$              50,112

$             41,761

$           149,203

$           124,228

Capital expenditures:

Purchases of property and equipment

$                46,635

$              42,188

$             37,244

$           119,256

$           105,769

Capitalized internal-use software

13,659

13,351

10,073

39,921

30,523

Capitalized stock-based compensation

2,561

1,835

1,941

6,694

5,406

Total capital expenditures

$                62,855

$              57,374

$             49,258

$           165,871

$           141,698

Net increase (decrease) in cash, cash equivalents, marketable securities and restricted marketable securities

$                39,889

$              39,725

$           (94,478)

$          (171,621)

$           (52,407)

End of period statistics:

Number of employees

2,884

2,654

2,356

Number of deployed servers

119,370

115,008

100,770

 

*Use of Non-GAAP Financial Measures In addition to providing financial measurements based on generally accepted accounting principles in the United States of America (GAAP), Akamai has historically provided additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Legislative and regulatory pronouncements discourage the use of and emphasis on non-GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. We believe that the inclusion of these non-GAAP financial measures in this press release and our earnings call helps investors to gain a meaningful understanding of our past performance and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts. Our management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods and to the performance of our competitors. These measures are also used by management in its financial and operational decision-making. There are limitations associated with reliance on these non-GAAP financial metrics because they are specific to our operations and financial performance, which may make comparisons with other companies' financial results more challenging. By providing both GAAP and non-GAAP financial measures, we believe that investors are able to compare our GAAP results to those of other companies while also gaining a better understanding of our operating performance as evaluated by management.

Akamai defines "Adjusted EBITDA" as net income, before interest, income taxes, depreciation and amortization of tangible and intangible assets, stock-based compensation expense, amortization of capitalized stock-based compensation, restructuring charges and benefits, acquisition related costs and benefits, certain gains and losses on investments, foreign exchange gains and losses, loss on early extinguishment of debt and gains and losses on legal settlements. Akamai considers Adjusted EBITDA to be an important indicator of the Company's operational strength and performance of its business and a good measure of the Company's historical operating trend.

Adjusted EBITDA eliminates items that are either not part of the Company's core operations, such as investment gains and losses, foreign exchange gains and losses, early debt extinguishment and net interest income, or that do not require a cash outlay, such as stock-based compensation. Adjusted EBITDA also excludes depreciation and amortization expense, which is based on the Company's estimate of the useful life of tangible and intangible assets. These estimates could vary from actual performance of the asset, are based on the historical cost incurred to build out the Company's deployed network, and may not be indicative of current or future capital expenditures.

Akamai defines "Adjusted EBITDA margin" as a percentage of Adjusted EBITDA as a percentage of revenues. Akamai considers Adjusted EBITDA margin to be an indicator of the Company's operating trend and performance of its business in relation to its revenue growth.

Akamai defines "capital expenditures" or "capex" as purchases of property and equipment, capitalization of internal-use software development costs and capitalization of stock-based compensation. Capital expenditures or capex are disclosed in Akamai's consolidated Statement of Cash Flows in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Akamai defines "normalized net income" as net income before amortization of other intangible assets, stock-based compensation expense, amortization of capitalized stock-based compensation, restructuring charges and benefits, acquisition related costs and benefits, certain gains and losses on investments, loss on early extinguishment of debt and gains and losses on legal settlements. Akamai considers normalized net income to be another important indicator of the overall performance of the Company because it eliminates the effects of events that are either not part of the Company's core operations or are non-cash.

Akamai defines "normalized net income per share" as normalized net income, plus interest add-back for diluted share calculation, divided by the basic weighted average or diluted common shares outstanding used in GAAP net income per share calculations. Akamai considers normalized net income per share to be another important indicator of overall performance of the Company because it eliminates the effect of non-cash items. Adjusted EBITDA and normalized net income should be considered in addition to, not as a substitute for, the Company's operating income and net income, as well as other measures of financial performance reported in accordance with GAAP.

Reconciliation of Non-GAAP Financial Measures In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the Company is presenting the most directly comparable GAAP financial measures and reconciling the non-GAAP financial metrics to the comparable GAAP measures.

 

Reconciliation of GAAP net income to Normalized net income

and Adjusted EBITDA

(amounts in thousands, except per share data)

Three Months Ended

Nine Months Ended

Sep. 30,

Jun. 30,

Sep. 30,

Sep. 30,

Sep. 30,

2012

2012

2011

2012

2011

Net income

$ 48,231

$ 44,239

$ 42,285

$ 135,697

$ 140,823

Amortization of other intangible assets

5,381

5,463

4,185

15,611

12,754

Stock-based compensation

22,635

25,621

15,141

69,180

42,465

Amortization of capitalized stock-based compensation

2,025

1,939

1,592

5,719

5,595

Acquisition related costs (benefits)

279

376

-

5,107

(440)

Restructuring (benefit) charge

-

(46)

158

14

158

Total normalized net income:

78,551

77,592

63,361

231,328

201,355

Interest income, net

(1,593)

(1,626)

(3,002)

(4,865)

(9,058)

Provision for income taxes

33,280

25,529

25,862

88,366

78,218

Depreciation and amortization

46,051

42,710

35,984

127,873

105,879

Other expense (income), net

241

(1,131)

188

(449)

1,330

Total Adjusted EBITDA:

$ 156,530

$ 143,074

$ 122,393

$ 442,253

$ 377,724

Normalized net income per share:

  Basic

$ 0.44

$ 0.43

$ 0.35

$ 1.30

$ 1.09

  Diluted

$ 0.43

$ 0.43

$ 0.34

$ 1.27

$ 1.06

Shares used in normalized per share calculations:

  Basic

177,455

178,547

183,085

178,040

185,515

  Diluted

181,053

181,817

185,704

181,738

189,089

 

Akamai Statement Under the Private Securities Litigation Reform Act This release contains information about future expectations, plans and prospects of Akamai's management that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995, including statements about future revenue growth. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including, but not limited to, effects of increased competition including potentially failure to maintain the prices we charge for our services and loss of significant customers; failure of the markets we address or plan to address to develop as we expect or at all; inability to increase our revenue at the same rate as in the past and keep our expenses from increasing at a greater rate than our revenues; a failure of Akamai's services or network infrastructure; delay in developing or failure to develop new service offerings or functionalities, and if developed, lack of market acceptance of such service offerings and functionalities or failure of such solutions to operate as expected, and other factors that are discussed in the Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC.

In addition, the statements in this press release represent Akamai's expectations and beliefs as of the date of this press release.  Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change.  However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so.  These forward-looking statements should not be relied upon as representing Akamai's expectations or beliefs as of any date subsequent to the date of this press release.

Contacts:

Jeff Young

Natalie Temple

Media Relations

Investor Relations

Akamai Technologies

--or--

Akamai Technologies

617-444-3913

617-444-3635

jyoung@akamai.com 

ntemple@akamai.com

 

SOURCE Akamai Technologies, Inc.



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